Ten-X (formerly Auction.com) has released its latest and rebranded Commercial Real Estate Nowcast, revealing that commercial valuations in December increased 26 basis points from November, a healthy showing despite divergent valuation patterns across the five major commercial real estate sectors.

“What has been interesting to watch is that the different segments have definitely been on very different paths,” Peter Muoio, Ten-X’s chief economist, told CPE. “While all have been increasing, the pace has varied considerably. Now perhaps we are seeing things realigning among segments.”

For example, the industrial Nowcast shows a sharp pickup in valuations for that segment, which has lagged the others, sort of book-ending the slip in the hotel Nowcast, which has been ahead of all the other segments.

“The other property segments—office, retail and apartment—posted moderate gains for the month, of varying degrees,” Muoio said. “Taking a several-months view, though, what seems to be happening is some convergence of the segments, with the formerly high-flying hotel and apartment segments slowing, while the other three major segments are beginning to catch up.”

Data from the report shows that industrial fundamentals are improving rapidly—vacancies are declining and rents are rising—meaning NOI growth looks to be strong in the coming years, notwithstanding the potential negative impacts from low oil prices and slower growth among key U.S. trading partners.

“The industrial segment is the only one that is benefiting from technology changes that are altering the way people shop, the way they work and the way they travel,” Muoio said. “While these are all headwinds for retail, office and hotel demand, respectively, industrial demand is being boosted by the warehousing and fulfillment needs of the rapidly growing e-retail segment. I believe investors are realizing the new growth potential in this property segment.”

That has led to more aggressive bidding, and final sale prices on the Ten-X platform and according to the survey performed in conjunction with Situs/RERC are indicating more expensive cap rates.

The Ten-X CRE Nowcast incorporates three sets of information: Google trends, bidding activity on the company’s platform and surveys of investors with which it has teamed up. The surveys are conducted constantly over the course of each month, so the company can see how sentiment is changing on a weekly basis.

Hotel valuations experienced a sharp downturn, dropping 275.3 basis points for the month, following a similarly lackluster showing in November. Muoio noted that investors appear to have turned bearish on this particular sector as the strengthening dollar has hurt foreign travel to the U.S. and encouraged Americans to vacation abroad, and as innovations like Airbnb have increased shadow competition.

“One of the things we have been seeing is a significant downshift in that sentiment, regarding the outlook for hotel cap rates and expected returns,” Muoio said. “This does not surprise me because RCA data shows deceleration in deal volume. Also, while the segment remains very healthy, obvious causes for concern about future trends include the strong dollar, weak economies in many of the countries that are sources of foreign visitors and a pickup in development in a few major markets.”

Looking ahead, Muoio noted that while he would not want to predict the nowcast, he wouldn’t be surprised if the overall valuations continue to rise, perhaps at a more moderate rate, with more fluctuation among sectors.

“One of the things we are watching carefully is what, if any, impact the weak equity markets so far in the start of this year has on the expectations of our survey respondents,” he said.